Eight of the 17 sectors covered by payroll tax relief are excluded from the program by the government

The provisional measure issued on December 29 by the Lula government excludes eight of the 17 sectors previously covered by the benefit from the payroll tax relief program. Among those excluded (see full list below) are activities that have been included in the program since the beginning of its validity, in 2011, such as textiles and clothing.

“There is no plausible reason for this to have occurred, being a pioneering sector on this agenda along with footwear and the area of ​​information technology”, says Fernando Pimentel, who presides over Abit (Brazilian Textile Industry Association).

The provisional measure revoked the payroll tax exemption for 17 sectors of the economy as approved by the National Congress last year. Instead, it establishes the gradual return of employer contributions to salaries, in a phased manner, until 2027.

Adopted in 2011, the policy allows companies to replace the 20% employer social security contribution, levied on salaries, with rates of 1% to 4.5% on gross revenue. The benefit would expire at the end of this year and, at the initiative of Congress, it had been extended until 2027.

President Luiz Inácio Lula da Silva vetoed the extension and, on December 14, the veto was overturned in a new vote, with a large majority in the Chamber and Senate. On New Year's Eve, however, the Minister of Finance, Fernando Haddad, said that the Ministry of Finance had not been heard in the debates and announced the MP, whose effects come into force on April 1st.

Under the provisional measure, 42 economic activities (and no more sectors) will have the employer's social security contribution – which is levied on the first minimum wage of their employees – reduced, in the first year, by 50% and 25%, respectively, depending on the group in which were allocated.

The first group of activities included activities related to the transport, TV and pay TV sectors, for example. In the second group, activities such as book publishing, shoe manufacturing and civil construction.

Manufacturers of machinery and equipment, in the textile and clothing industry, call centers and animal protein found that, in the list of activities listed in the MP, there is none that is related to their sectors. This way, they understand that they will be eliminated from the program as soon as the MP comes into force.

“The animal protein sector was left out of the MP, it is not among the activities covered, without any justification. This will lead to an increase in the cost of chicken, eggs and pork for the consumer”, says Ricardo Santin, president of ABPA (Brazilian Animal Protein Association).

Estadão questioned the Federal Revenue Service about the criteria considered in the analysis of the sectors served by the MP, but received no response. Tax technicians say, informally, that the tax relief program has changed and that now sectors will no longer be covered, but economic activities.

“This is divide and rule. Everyone was left with almost nothing and others with nothing. It makes no sense to eliminate an activity such as a call center, which is the most labor intensive of all the sectors served by the program and whose majority of workers are women and young people who earn a minimum wage”, says Vivien Suruagy, from Feninfra (National Call Center Federation, Installation and Maintenance of Telecommunications and IT Network Infrastructure).

This Thursday, the 4th, business confederations such as CNI, CNA and CNC (Industry, Agriculture and Commerce, respectively) are expected to join the campaign against the provisional measure.

To the president of Congress, senator Rodrigo Pacheco (PSD-MG), Haddad said that the period until April for the MP to come into effect was presented by the government as a way of giving time for negotiation with Parliament on the continuity of the program.

The minister's justification for issuing the MP is that the tax exemption for the 17 sectors will have an estimated cost of R$12 billion this year, an amount that was not included in the Budget.

Therefore, according to Haddad, the government would have to reduce the tax waiver to R$6 billion and compensate another R$6 billion with the extinction of Perse (Emergency Program for the Resumption of the Events Sector), also provided for in the same MP.

Sectors that remain on tax exemption

Shoes
Leather goods
Communication
Information technology (IT)
Construction
Construction and infrastructure works
Public road transport
Road freight transport
Metro rail passenger transport

Sectors excluded from payroll tax relief in the MP

Call Center
Clothing and clothing
Textile
Manufacturing of vehicles and bodies
Machines and equipment
Integrated circuit designs
Communication technology (ICT)
Animal protein